PHL builders to deliver strong results in 2025

Listed Philippine construction companies are expected to deliver strong results in 2025 — an election year — driven by increased state infrastructure spending, analysts said.

“[Construction companies] are set for growth due to the country’s favorable demographics, as well as preparations for the May 2025 midterm elections especially before the election ban,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said.

He said infrastructure projects are expected to be expedited before the Commission on Elections (Comelec) enforces a public works ban before the May 2025 elections.

He added that the expected rate cuts by the US Federal Reserve are expected to increase demand for loans from property developers and construction companies.

“Increased government infrastructure spending would benefit construction companies that are part of the supply chain of the various infrastructure projects around the country,” Mr. Ricafort said.

State infrastructure spending rose 2.52% in October from a year earlier, according to data from the Department of Budget and Management.

“Overall, the profitability outlook for 2025 appears cautiously optimistic, contingent on favorable economic policies and the execution of planned projects,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

He said the profitability of construction and infrastructure companies in 2025 depend on factors such as government infrastructure spending, private sector projects and macroeconomic conditions.

“The Philippine government’s ongoing infrastructure development through different initiatives can stimulate demand for construction services,” he added.

But the growth of the sector is expected to be underpinned by raw material costs including steel and cement, which are influenced by global markets and foreign exchange volatility.

Megawide Construction Corp. returned to profit in the third quarter, posting an attributable net income of P142.7 million from a net loss of P29.85 million a year earlier. Revenue rose 10.9% to P5 billion.

EEI Corp. had an attributable net loss of P31.75 million in the third quarter from an attributable net income of P406 million a year earlier as gross revenue fell 27.8% to P3.14 billion.

Phinma Corp., which has a construction material unit, posted an attributable net income of P144.86 million in the third quarter, 75.1% lower than a year earlier, even as revenue rose 0.5% to P6.61 billion. Gross expense increased by 2.4% to P5.5 billion.

Source: Business World

Growth may fall below 6% in 2025

Philippine economic growth could fall below 6% in 2025 amid a “gentle” recovery in domestic demand and expectations of a widening trade deficit, Bank of America (BofA) said. 

BofA Securities economist for the Philippines Jojo Gonzales said they forecast Philippine gross domestic product (GDP) to grow by 5.9% in 2025.

This would narrowly miss the government’s revised 6-8% growth target next year.

The economy expanded by a slower-than-expected 5.2% in the third quarter, its weakest growth in five quarters.

In the nine-month period, GDP growth averaged 5.8%, slower than the 6% print a year ago.

Earlier this month, the Development Budget Coordination Committee tweaked its economic growth targets to account for “evolving domestic and global uncertainties.”

“While we expect a gentle recovery in private consumption and investments over the next year, the growth in government spending is likely to be muted, and a wider net trade deficit is anticipated,” Mr. Gonzales told BusinessWorld in an e-mail.

In the third quarter, growth in government spending slowed to 5% from 11.9% in the previous quarter.

Latest data from the Philippine Statistics Authority (PSA) showed that the country’s trade deficit ballooned to $5.8 billion in October, the widest gap in over two years.

Meanwhile, BofA said it expects inflation to average 3% next year, well within the central bank’s 2-4% target.

The Bangko Sentral ng Pilipinas (BSP) expects inflation to average 3.3% in 2025. The central bank said that risks to the inflation outlook for next year remain tilted to the upside.

Headline inflation averaged 3.2% in the 11-month period, according to latest data from the PSA.

“A weaker peso remains a risk to this forecast, though softer oil prices will likely provide a cushion to negate the impact of the weaker currency,” Mr. Gonzales said.

BofA expects the dollar strength to persist next year, with the peso potentially breaching the P61 mark.

“The US dollar will remain stronger in 2025, and our end-2025 forecast is P61,” Mr. Gonzales said.

So far this year, the peso has hit a record-low P59-per-dollar level thrice.

BSP Governor Eli M. Remolona, Jr. earlier said they are watching the peso closely and have been a bit more active in the markets than usual.

The BSP had to intervene in small amounts in the past few months amid the stronger dollar after Donald J. Trump won as US President.

Meanwhile, BofA estimates that the central bank will deliver up to 75 basis points (bps) worth of rate cuts next year.

“This will bring down the policy rate to 5% (by end-2025),” Mr. Gonzales said.

Last week, the Monetary Board reduced borrowing costs by 25 bps at its final policy review of the year, bringing the key rate to 5.75%.

The central bank has slashed rates by a total of 75 bps this year since it began its easing cycle in August.

Mr. Remolona earlier said delivering 100 bps worth of rate cuts next year might be “too much.”

The central bank will likely keep reducing rates in “baby steps” as it is still carefully monitoring upside risks to inflation, the BSP chief added.

“We also expect the Fed rate to settle at 4% — one cut in December and two cuts in the first half of 2025,” Mr. Gonzales added.

The Fed continued cuts in December after a period of aggressive rate hikes but signaled fewer cuts in 2025. Investors are now focused on how gradually the US central bank would cut rates next year, Reuters reported.

While a benign US inflation reading on Friday eased some concerns about the pace of cuts next year, markets are still pricing in just about 35 bps worth of easing for 2025.

US investors are preparing for a swathe of changes in 2025 — from tariffs and deregulation to tax policy — that will ripple through markets as Mr. Trump returns to the White House in January.

Source: Business World

PH growth seen slowing to 2026

Philippine economic growth could fall well below target this year and keep slowing in the next two years, a United Kingdom-based research consultancy said, primarily due to likely constraints to consumption.

Pantheon Macroeconomics, in an outlook for emerging Asian economies for the first half of 2025, said the country's gross domestic product (GDP) growth was likely to average 5.4 percent in 2024, down from 5.5 percent a year earlier and the lowest since 2020's 9.5-percent plunge.

That contraction was due to the impact of the Covid-19 pandemic and Pantheon said that efforts to reduce the debt burden incurred to prop up the economy, along with high interest rates, would weigh on government and private sector spending.

"Domestic-demand driven India and the Philippines will remain hampered by incomplete post-Covid fiscal consolidation and historically-tight monetary policy," the consultancy said.

"Surveys show that a slowing rebuild of household savings in the Philippines and cost-of-living crisis damage cushioned the slump in consumption growth this year, albeit at the likely expense of delaying a real recovery in GDP growth this year," it also said.

Both India and the Philippines, along with Indonesia, are among the emerging Asian economies expected to post growth slowdowns, but the rest — Thailand, Vietnam, Singapore, Malaysia and Taiwan — were forecast to perform better than last year.

While the Philippines will see growth ease, the expansion will still be among the highest in the group, next only to India's 67.8 percent and Vietnam's 6.7 percent.

Improvements, however, are not expected for the following two years with GDP growth forecast to slow further to 5.2 percent in 2025 and 4.8 percent in 2026.

All three forecasts fall below the government's recently-revised 6.0-6.5 percent and 6.0-8.0 percent targets for this year and 2025-2028, respectively.

On a bright note, Pantheon said the Philippines, India and Indonesia, given their domestic demand-driven economies, offered "potential refuge" should a trade war erupt if US President-elect Donald Trump pushes through with threats to raise tariffs on all US imports.

The country's growth was a lower-than-expected 5.2 percent in the third quarter as a series of storms affected agriculture output and government infrastructure projects. Year to date, the expansion remains below target at 5.8 percent.

Many observers have lowered their 2024 forecasts for the Philippines, including the World Bank that this week trimmed its outlook for the year to 5.9 percent from 6.0 percent and the Asean+3 Macroeconomic Research Office, which earlier this month lowered its 2024 projection to 5.8 percent from 6.1 percent.

An exception would be the Asian Development Bank, which on Wednesday said that it still expected the country to grow by a within-target 6.0 percent this year.

Pantheon Macroeconomics said the Bangko Sentral ng Pilipinas would continue to ease policy given the growth pressures, with the target reverse repurchase rate likely to fall to 4.75 percent by the end of 2025.

The central bank's benchmark rate currently stands at 6.0 percent following the two 25-basis-point cuts by the policymaking Monetary Board in August and September.

Pantheon expects monetary authorities to implement another 25-bps cut during their final policy meeting for the year on Dec. 19.

Source: Manila Times